UK MARKET TALK ROUNDUP: BROKERS COMMENTS

28th Jul 2010 08:19

Broker comments in the UK today. Compiled by Dow Jones Newswires Markets Desk, [email protected] Contact us in London. +44-20-7842-9464 [email protected] 0719 GMT [Dow Jones] Compass Group's (CPG.LN) strong organic sales growth at the 3Q stage is likely to be sustained, suggesting a 5%-to-7% revenue growth rate in the medium term, says Shore Capital analyst Greg Johnson. However, a weaker-than-expected margin projection may disappoint the market, Johnson says. Buy rating. Shares +1.7% at 567p. ([email protected]) 0719 GMT [Dow Jones] Oriel Securities downgrades Barclays (BCS) to hold from add, and HSBC Holdings (HBC) to add from buy, but maintains target prices. Says Barclays Capital should see revenue cut of 20% in 2Q versus 1Q, while bank now trades 8% above 312p target price. HSBC trading 10% below 730p target, but shares approaching fair value. Adds retail market continued to be challenging in 2Q based on U.S. bank results. HSBC +0.3% at 668p, while Barclays +2.5% at 348p. ([email protected]) 0707 GMT [Dow Jones] BG Group's (BG.LN) performance in its liquefied natural gas unit was surprisingly good in the second quarter, says Panmure Gordon analyst Peter Hitchens. At $540 million, LNG profits were well above analysts' estimates, which is surprising because BG has previously been indicating that 2010 LNG profits would be lower, he says. The company benefited again from diverting cargoes to the highest value markets, he adds. Has a buy rating, 1500p target. Shares -0.1% at 1062p. ([email protected]) Contact us in London. [email protected] 0700 GMT [Dow Jones] Brit Insurance (BRE.LN) announces a strong set of 1H results, says a trader, as well as announcing it has allowed Apollo to conduct due diligence on its books having submitted a revised indicative offer of 1075p/share. Says pretax profit of GBP72.8M is ahead of consensus estimates of GBP45.4M. Adds investment income was also ahead of expectations at GBP57.5M versus GBP46.7M. Additionally, Brit continued to show credible underwriting discipline with premiums down 13.4% on 2009, says trader. "The results are strong and should provide considerable reassurance to Apollo, and we expect the bid to be formalized," he adds. Brit shares closed at 913p. ([email protected]) 0658 GMT [Dow Jones] Yell's (YELL.LN) 1Q results are in line with expectations, says Numis Securities. Notes normalized pretax profit of GBP47M versus Numis's estimate of GBP43M and consensus of GBP42M. But the brokerage continues to see material cyclical, structural, financial and managerial challenges facing the group. "We believe new management is likely to increase investment, particularly online, and see a strong likelihood of a further equity raise." As such, Numis downgrades the stock to reduce from hold. Keeps 25p price target. Shares closed Tuesday at 30p. ([email protected]) 0657 GMT [Dow Jones] Rexam (REX.LN) delivers "strong" 1H results, says Seymour Pierce. Says results are "well ahead of our expectations and underpinning our view that the beverage can market had staged a substantial recovery in 1H." Adds the real improvement is in margins, which increased to 10.7% from 8% due to cost reduction, volume growth and better mix. Rexam expects the second half of the year to be similar to the first half. Reiterates buy rating, and target price of 370p. Shares closed at 340p. ([email protected]) 0656 GMT [Dow Jones] EasyJet (EZJ.LN) is emerging strongly from the downturn with robust trading in terms of yields and load factors, says Panmure Gordon. "Cost reductions and yield improvements (helped by a stronger revenue environment and a reduction in capacity growth in the coming years) should allow EPS to rise strongly in the coming years," says Panmure. Adds the company has excellent growth prospects to justify a superior rating, but recognises that uncertainty regarding the easyJet brand license agreement and potentially the long term growth strategy is unhelpful. Retains buy recommendation, with 550p target price. Shares closed Tuesday at 434p. ([email protected] ) 0654 GMT [Dow Jones] Invensys's (ISYS.LN) 1Q update is slightly disappointing, says a trader. Notes the only new information in the update is that the rail division will have an extra GBP13M of costs to complete three mass transit contracts, meaning margins will be below the 18% medium target. Says Operation Management and Controls are in line. Notes the stock has rallied in the last two weeks, and expects some weakness Wednesday. Shares closed Tuesday at 293p. ([email protected]) 0652 GMT [Dow Jones] Virgin Media (VMED.LN) 2Q results are a "little better than expected", with the group targeting 3X net debt to operating cash flow within 2-3 years and an initial capital return program of GBP700m, Berenberg Bank. "Overall, however group financials are better than expected and the cash return program will likely see the stock through $20 in my view and will probably be the main focus of the market today," says bank. Berenberg Bank will review its estimates and valuation after the 2Q results and the analyst meeting, incorporating the new cash return information and target leverage ratios. Berenberg Bank has a buy rating on Virgin Media and $20 price target. Stock closed at 1247p Tuesday. ([email protected]) 0638 GMT [Dow Jones] Compass Group's (CPG.LN) 3Q trading shows further strong improvement in the organic growth, says a trader. Says 3Q saw 5.5% organic growth compared to 2Q which saw 2.5% and 1Q which saw 1.7%. Says 3Q organic growth was driven by an increase in new business wins and a slight improvement in retention rates. Also, the company shows particularly strong performances in North America and rest of world. "3Q margins have improved by circa 35 basis points and free cash flow conversion remains strong," adds trader. Shares closed at 558p. ([email protected]) 0636 GMT [Dow Jones] British American Tobacco's (BATS.LN) 1H numbers look good, says a trader. Notes volumes are flat, having been down 1% in 1Q. Says EPS of 87.1p is bang in line with his expectations. Says the results imply "FY numbers look very safe at worst." Shares closed Tuesday at 2259p. ([email protected]) 0630 GMT [Dow Jones] BG Group's (BG.LN) 2Q results are positive overall, but the companies upstream division fell short of expectations, says ING analyst Jason Kenney. The performance at the liquefied natural gas division was very good and it's likely that formal guidance will be raised, Kenney says. Reserves and resources continue to grow, he adds. Gives buy rating, 1300p target. Shares closed down 0.3% Tuesday at 1063p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 28, 2010 03:19 ET (07:19 GMT)